1041 not calculating tax owed correctly

[JeffCPA]

I have two virtually identical 1041 tax returns.   Both are "complex trusts"   Both are small trust, with very little dividend income, but the income was not distributed or paid out to the named beneficiaries.  So, the dividend and interest income are taxable at trust level.  There is no distribution deduction.   I have entered the beneficiary information for the single beneficiary for each separate trust. 

Yesterday, for what I will call Trust A, there is $1,023 of income, there is a $100 exemption amount on line 21.  LIne 23 has taxable income of $923, and line 24 has total tax of $27.

Today I am completing another Form 1041 for another client, call this one Trust B.   Everything is essentially the same in all parameters.   this one has $854 of income, a $100 exemption, and $754 of taxable income on line 23.   Line 24, total tax is zero.   How can the total tax be zero on this line.  I cannot for the life of me figure out what is wrong here?  Or what I have inadverently entered differently.   Help.

[sjrcpa · Accepted solution]

Qualified dividends being taxed at a lower rate, which could be -0-

[JeffCPA]

That is exactly it.   Has to be.   The 1041 that is showing zero income tax owed, is essentially all qualified dividends so they are being taxed at lowest rate, and in this case because income is so low, that rate is zero percent. 

I also went back to other 1041, and subtracted out the qualified dividends and did the math for tax on remaining balance and it adds up exactly as it should.   Thanks very much for your prompt and effective reply.    Appreciate it.